60 More Days of the SameDecember 23, 2011 - by Donny Shaw
So, House Republicans have completed their cave in and agreed unanimously to the Senate’s two month extension of the payroll tax holiday, unemployment insurance, and other policies that were scheduled to expire on December 31st. There’s a lot of buzz about how this is good for Obama on the political level, but let’s be clear — all this agreement does is extend the status quo. Nothing in this bill would provide new stimulus to boost the economy or create jobs. And it will only last for 60 days, after which point the payroll tax holiday and extended unemployment insurance benefits are at serious risk of being reduced.
As Ezra Klein explained in this mornings Wonkbook, it all depends on what the two parties take away from today’s GOP concession. If the Republicans make a decision after losing this fight that it’s not worth waging it again, then the negotiations over the next 60 days could be much smoother than what we just went through. But if their take away is that they could have won if House Speaker Rep. John Boehner [R, OH-8] and Senate Minority Leader Sen. Mitch McCon nell [R, KY] had been on the same page, then they may dig in deeper and be more confident about standing their ground.
If the Republicans dig in, extended unemployment insurance benefits will be especially at risk in the next deal. Just a few weeks ago, the Republicans had been pushing for a major reduction in extended benefits from the current maximum benefit period for the long-term unemployed of 99 weeks to 59 weeks. In the temporary deal agreed to today, the maximum benefit period will be reduced from 99 weeks to 79 weeks in several states, including some like Michigan and Rhode Island that have especially high unemployment rates. Unemployment benefits are among the most stimulative form of government spending because the money is directed towards people who are very likely to spend it quickly, so cutting unemployment benefits could have a serious drag on demand for goods and services. And there is still only 1 job opening for every 4 unemployed people looking for work (and it’s actually worse than that because of the millions of underemployed workers that are fighting for the same job), so keeping the safety net unemployment benefits provide in tact is still just the right thing to do.
So just because there’s a deal in place for now, the current stimulus policies that are supporting the slight economic growth we’re seeing now are still very much at risk of being cut. Today’s deal is about punting the fight until after recess and trying to avoid the optics of raising taxes and slashing unemployment around the holidays.